Samsung Life Insurance weighed down by legal disputes

Samsung Life Insurance’s headquarters in southern Seoul / Yonhap

Court rules in favor of policyholders of insurer’s immediate annuity contract

By Kim Bo-eun

Samsung Life Insurance has been mired in a number of legal battles in the past few years, which have weighed on the insurer as a major burden.

The Seoul Central District Court on Wednesday ruled in favor of policyholders of Samsung Life’s immediate annuity, in a class action suit against the insurer over insufficient payments.

An immediate annuity is an insurance contract funded by a lump sum payment, such as money in a savings account. Policyholders are able to receive payments each month, which come from profits from investing the policyholders’ lump sums of money.

A total of 18 holders of Samsung’s immediate annuity policy filed the suit. The policyholders claim that Samsung did not properly notify them of deductions that would be made to their monthly payments, and are demanding the insurer pay up on the unpaid amounts.

Samsung has appealed the lower courts ruling, and it is expected that it will take over a year for the final court ruling on the case to be made. Multiple local life insurers are also mired in legal battles over immediate annuity contracts, including Hanwha and Kyobo.

In 2018, policyholders launched a class-action suit against a number of life insurers, including Samsung Life, accusing them of providing insufficient monthly payments to holders of immediate annuity contracts.

The Financial Supervisory Service’s (FSS) dispute settlement committee earlier sided with the policyholders, stating Samsung did not provide clear standards on payments it would provide. The authority’s stance is seen to be affecting court rulings on the matter.

However, court rulings on the same issue have varied. Samsung Life in October won a suit filed by an individual policyholder over its immediate annuity product. Though, given that more rulings have sided with policyholders so far, insurers including Samsung have been preparing for possible payouts by setting aside provisions.

Samsung Life’s board earlier decided that it will provide payments according to the top court’s ruling. The company reflected 278 billion won ($234 million) in provisions associated with lawsuits over its immediate annuity contracts in its earnings for the second quarter of 2021, after it lost a lawsuit filed by 57 policyholders.

Data from the Financial Supervisory Service (FSS) shows that Samsung has the greatest amount of outstanding payments for immediate annuity contracts among life insurers, at 400 billion won. The policy has over 50,000 holders.

Samsung Life was also embroiled in a suit with policy holders over its cancer policy, but the Supreme Court in September 2020 sided with the insurer.

The claimants had called for Samsung to cover nursing home fees for holders of its cancer policies, but the company had refused, stating that the expenses were irrelevant according to the terms of its policy.

The FSS in December 2020 concluded that heavy sanctions should be imposed on Samsung Life for irregularities, including the refusal to pay cancer policyholders’ claims.

The Financial Services Commission (FSC) is the entity that finalizes sanctions on financial firms, but it has yet to reach a conclusion, despite a full year having passed since the FSS forwarded its proposal. It is considered unusual for the FSC to take more than several months to impose a sanction after the FSS forwards its view.

Matters have become more complicated with the top court ruling in favor of Samsung in 2020.